FL Stock Index 2012-05-01 to 2012-05-31

Summary:
Florida's stock index dropped more than 2.6% from the previous month in May, although it did gain 1.29% from May 2011 and remains up nearly 9% year-to-date. Even though Florida's index declined in May, it still managed to outpace the S&P 500, which fell by more than 3.5%. The only two sectors of the S&P 500 which produced month-over-month gains were telecommunications and utilities, which make up a very small percentage of Florida's employment. Of the sectors to which Florida is sensitive, financials took the biggest hit at a 5.7% month-over-month loss, while consumer discretionary, consumer staples, and health care each lost between one and two percent.

Extended Analysis:
Florida’s stock index finished its worst month year to date in May, although this story is similar for all U.S. stock indexes, as there were few sectors to offer refuge. Only the telecommunications and utilities sectors managed to finish positive last month, posting gains of 5.31% and 1.72%, respectively. The telecom sector was mostly led higher by AT&T and Verizon in May, as these two companies combined made up $317.6 billion of the S&P 500 telecom sector’s $374 billion market cap. Unfortunately for the Sunshine State, telecom and utilities only comprise approximately 3% of total state employment. The financial sector took the biggest hit of any sector percentagewise, shedding nearly 6% in May, decreasing once again on fears of the European debt crisis. This situation of certain members of the European Monetary Union (EMU) being overburdened with sovereign debt only worsened in May, with Spain and Italy still in the crosshairs, and Greece’s condition becoming so bleak that there were open talks of the country actually dropping the euro. Add to this some less-than-favorable economic data from the U.S., however, and the effects reached far beyond financials.

The U.S. economy started off 2012 with some steam, producing mostly favorable employment and sales figures, along with an increase in consumer confidence. As early as the first week of May, however, sales reported by Redbook and ICSC-Goldman missed estimates. Employment was, thankfully, more mixed in that same week with the ADP employment report missing estimates but jobless claims giving a more positive outlook. Meanwhile, indexes of manufacturing and non-manufacturing activity didn’t provide much help either, although the numbers would have to have been very impressive to abate the more dire issues. Because of these reports and the Euro debt crisis, U.S. stocks tumbled in the first two weeks of May. As mid-month approached, there seemed to be only one silver lining for the month—the long-awaited public debut of Facebook (ticker symbol FB). For over a year now, investments banks have continuously upped their valuation of the company, finally settling somewhere over $100 billion. On May 18th, the social networking company was finally trading on public markets, and after an initial public offering (IPO) price of $38 per share the company traded as high as $45 on the first day. Confidence in Facebook didn’t last, however, as founder Mark Zuckerberg quickly learned that judgmental investors are often fickle with their money. Facebook traded below $30 before the month was out, mostly from negative press on investor concerns about the IPO price and polls that showed that 34% of users are spending less time on Facebook as compared to six months ago.

Even though May set back Florida’s stock index to February levels, there are few concerns that directly involve sectors in which our state has high employment—even the financial sector constitutes less than 10% of Florida’s current workforce. Consumer discretionary, industrials, and health care are the state’s key employers. Furthermore, the S&P 500 itself is used as the benchmark for occupations such as lawyers and government workers. Year-to-date, consumer discretionary and health care sectors have increased by 7.6% and 2.89%, respectively, and even the S&P 500 remains up 2.22%. The industrial sector lags behind at a loss of 1.23%, but unlike earlier in the recovery, Florida can be thankful that it does not rely heavily on the energy sector, which is down almost 10% on the year. In any case, continued fears over the U.S. economy and the EMU debt crisis may drag the market low, while, on the other hand, lower fuel prices give consumers more to spend. Therefore, we see Florida’s index moving lower in June, but at a much less accelerated rate than was seen in May, perhaps finishing the month around 154.